Critchell v Critchell [2015] EWCA Civ 436

Judgment in financial remedy proceedings in which the Court of Appeal restated the application of the principle in Barder v Barder (Caluori intervening) [1987] 2 FLR 480.

This was a needs-based case where the parties had settled at FDR. A consent order was agreed which provided that the wife retain the matrimonial home, worth £190,000, and there be a charge in favour of the husband equal to 45% of the equity.

However, within a month of the consent order, the husband's father died, leaving him an inheritance of £180,000. The wife sought to appeal on the basis that the husband's inheritance was a Barder event which invalidated the basis upon which the consent order had been made.

Her Honour Judge Wright allowed the wife's appeal and varied the consent order by extinguishing the husband's charge over the former matrimonial home. Her Honour Judge Wright considered the four conditions in Barder and held that the husband's inheritance had invalidated the basis of the consent order. Judge Wright reasoned that since the original order had been based upon need, while the wife's need had remained the same, the husband's inheritance meant that he no longer needed his share in the former matrimonial home.

The husband sought to appeal that decision. In dismissing the husband's appeal, Lady Justice Black endorsed the reasoning of Her Honour Judge Wright. Lady Justice Black stated that Judge Wright was correct to analyse the consent order as being the only way, in the circumstances then prevailing, that the husband could be enabled to pay off his debts at a future date, leaving the parties in fairly equal capital positions in terms of the equity in their properties. The impact of the inheritance so soon after the hearing was that the husband no longer needed his interest in the former matrimonial home to discharge his indebtedness. There had been a fundamental change in the needs of the parties.

Finally Lady Justice Black commented that it is rare for a case to come within the Barder principles.

2. The parties are in their mid forties. They were married in 2001. They have two daughters aged 14 and 12. They separated in August 2010. The husband moved out of the former matrimonial home leaving the wife living there with the children. He bought himself a home using £85,000 borrowed from his father and £63,000 taken on mortgage.

3. On 12 March 2013, a financial dispute resolution hearing took place before District Judge Mullis. At the time, the only significant matrimonial asset was the former matrimonial home. It was worth approximately £190,000. There was a mortgage of £10,000. Allowing for notional costs of sale, the net equity was therefore taken as £175,000. The husband's home had little, if any equity. In her Form E financial statement dated September 2012, the wife said that she was working part time, earning a modest salary as a hair stylist and also receiving working and child tax credits and child benefit. The husband is a painter and decorator who works as a sole trader. In his Form E dated August 2012, he estimated that his net annual income was £5,000 but noted that he had been unable to work full time because of an injury and hoped that his income would improve later in 2012. He too was receiving working tax credit. He was paying some maintenance for the children through the Child Support Agency.

4. Following an indication from District Judge Mullis at the financial dispute resolution hearing, the parties came to terms about ancillary relief. A consent order was made that day, essentially in Mesher terms. It provided for the former matrimonial home, which was in joint names, to be transferred to the wife, subject to the mortgage on it for which she was to take over responsibility. There was to be a charge in favour of the husband for a lump sum equal to 45% of the net proceeds of sale of the property. The charge was not to bite until the earliest of four trigger events, namely:

i) the youngest child reaching 18 or completing full time secondary education, whichever is the later;

ii) the death of the wife;

iii) the remarriage, or cohabitation for a period of six months in any twelve month period, of the wife;

iv) sale of the property.

It was further provided that the charge was not to be exercisable without leave of the court while any child of the family in occupation of the property was still a minor, or was of full age but still in full time secondary education. The order also made provision for nominal periodical payments from the husband to the wife for a period of time.

5. Within a month of the consent order, the husband's father died, on 9 April 2013, leaving him a sum of money. By a notice of appeal dated 4 September 2013, the wife therefore sought to appeal against the consent order. Despite suggestions in the wife's notice and grounds of appeal that the husband was aware of his inheritance prospects at the time of the consent order and failed to disclose this, by the time of the hearing before Judge Wright it was accepted that the husband's father's death was "completely unforeseen" (as the judge recorded at §6 of her judgment). The wife's case was put on the basis that the inheritance was a Barder event which invalidated the basis or fundamental assumption upon which the consent order had been made.

6. Her Honour Judge Wright granted permission to appeal in January 2013 and gave directions with a view to a hearing before her in March 2014.

7. On 20 March 2014, Judge Wright allowed the wife's appeal and varied District Judge Mullis's order by extinguishing the husband's charge over the former matrimonial home, which was to be the wife's sole property. It is from that order that the husband appeals.

8. For the Barder principle to apply, four conditions must be satisfied. In Barder (at 495), Lord Brandon (with whom there was unanimous agreement) reviewed the authorities and said:

"My Lords, the result of the two lines of authority to which I have referred appears to me to be this. A court may properly exercise its discretion to grant leave to appeal out of time from an order for financial provision or property transfer made after a divorce on the ground of new events, provided that certain conditions are satisfied. The first condition is that new events have occurred since the making of the order which invalidate the basis, or fundamental assumption, upon which the order was made, so that, if leave to appeal out of time were to be given, the appeal would be certain, or very likely, to succeed. The second condition is that the new events should have occurred within a relatively short time of the order having been made. While the length of time cannot be laid down precisely, I should regard it as extremely unlikely that it could be as much as a year, and that in most cases it will be no more than a few months. The third condition is that the application for leave to appeal out of time should be made reasonably promptly in the circumstances of the case. To these three conditions, which can be seen from the authorities as requiring to be satisfied, I would add a fourth, which it does not appear has needed to be considered so far, but which it may be necessary to consider in future cases. That fourth condition is that the grant of leave to appeal out of time should not prejudice third parties who have acquired, in good faith and for valuable consideration, interests in property which is the subject matter of the relevant order." (my italics)

9. It was conceded before Judge Wright, as it was before us, that the second, third and fourth conditions were satisfied in the present case. The issue was over the first condition. Judge Wright therefore focussed upon whether the husband's inheritance had invalidated the basis of the order made by District Judge Mullis.

10. The inheritance was agreed to be about £180,000 and, in addition, such liability as the husband had to repay the £85,000 to his father was extinguished.

11. Judge Wright considered that the original order had been based upon need (see §16 of her judgment) and that, whereas the wife's need had remained the same, the husband's inheritance meant that he no longer needed his share in the former matrimonial home. In a key passage in her judgment, she said:

"16. This case was always based on need. This was not a case in which the value of the assets, that is the matrimonial assets, changed. This was a case where effectively a windfall came to the husband very quickly after the order which was made.

17. I have no hesitation in concluding on the basis of need the fundamental basis of the order that was made cannot stand [sic]. Both parties needed a home. The only way it could be achieved by the District Judge at the time that he made the order was by giving the wife the benefit of the husband's interest in the home and giving him the opportunity in about seven or eight years' time to pay off, effectively, the loan that he had obtained from his father so that he would also have equity of around the same value as the wife, although slightly less than the wife.

18. There were very limited resources available to the District Judge at the time that he gave the indication. Within a month that had changed. The husband, as I say, then had equity in his home of £85,000 rather than potentially a repayable loan for that amount and no equity in his home at all. The husband also had capital available to him of £180,000, so sufficient to pay off the rest of his mortgage of about £64,000 and to leave him with capital of over £100,000. The husband therefore had no need of his interest in the former matrimonial home."

12. In these circumstances, Judge Wright was satisfied that the Barder principle applied. In her view, within a month of the District Judge making his order, events had fundamentally undermined the basis on which it was made so that, "effectively….the basis of his order was wrong" (§21). She therefore allowed the appeal in order to make fair provision for the parties' needs in the changed circumstances. She noted that the order she substituted would not put the wife in as strong a capital position as the husband, because she would not have additional capital or a mortgage free house. However she considered this appropriate because "this was a windfall in the husband's favour and therefore to that extent he must benefit from that" (§24). The submissions13. We were grateful to both counsel for their succinct and focussed submissions, written and oral.

14. Mr Elcombe for the husband argued that the first Barder condition was not satisfied and that Judge Wright should not have interfered with the consent order. He submitted that the husband's inheritance did not so change the picture, either in relation to the parties' assets or the family's needs, as to justify a finding that it invalidated the basis, or fundamental assumption, on which the order was made. He submitted that the object of the order was to meet the needs of the wife; it achieved that and that had not changed as a result of the husband's inheritance. Judge Wright fell into error, on his submission, by substituting her own view of what was a fair order in the circumstances as they were at the time of the hearing before her, when there was no justification to interfere with the order made by the district judge.

16. There was particular concentration upon Cornick where Hale J, as she then was, identified three possible causes of a difference in the value of assets taken into account at the hearing (see page 536E). I am not convinced that this analysis was particularly relevant to the present case because I do not, in fact, see it as turning on a change in the value of the assets at all; I will return to this in due course. However, what should be noted in Cornick and elsewhere in the authorities is the court's emphasis upon the rarity of successful Barder applications. In Richardson, Lord Justice Thorpe said that:

"86. Cases in which a Barder event, as opposed to a vitiating factor, can be successfully argued are extremely rare, should be regarded by the specialist profession as exceedingly rare, and should not be thought to be extendable by ingenuity or the lowering of the judicially created bar."

17. The wife supported Judge Wright's decision as correct for the reasons the judge gave. Mr Peat accepted, on the wife's behalf, that the husband's inheritance is not a matrimonial asset but submitted that, if the reality had been known, it would have been taken into account by the court as "other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future" (section 25(2)(a) of the Matrimonial Causes Act 1973). It was assumed at the time of the original order that the husband had no resources from which to settle the debt to his father or the mortgage on his home and needed a share of the former matrimonial home in order to do so in due course. Following the death of his father, the £85,000 no longer has to be repaid, the husband has the means to repay his mortgage, and he would have capital left over from the inheritance after discharging his debts. In contrast, if he were to maintain his share in the former matrimonial home, the wife would have to raise the money in due course to pay him out as well as discharging the very small mortgage remaining on the former matrimonial home. The cost to her would be £89,000 on the figures as they were at the time of the hearing before the district judge. Discussion and conclusions18. I do not accept Mr Elcombe's submission that the judge erred in finding that the death of the husband's father and the husband's consequent inheritance had invalidated the basis or fundamental assumption upon which the consent order was made.

19. Mr Elcombe rightly accepted that the order in this case was dictated by need. I think he also accepted that need is a relative concept which is affected by how much there is to go round. Where resources are limited, the court's options in providing for the parties' needs may be circumscribed and there may be no choice but to leave one or both spouses in a situation which will be testing. If more resources are available, needs can be provided for more fully or less precariously.

20. This case was one where resources were very limited and, in order to cater for both parties' needs, recourse had to be had to a Mesher order with the inevitable future challenges for the wife who would eventually have to raise money to redeem the husband's charge, and present challenges for the husband who was unable to have access to his capital until the children grew up. It seems to me that Judge Wright was correct to analyse the consent order, as she did at §17 of her judgment, as being the only way, in the circumstances then prevailing, that the husband could be enabled to pay off his debts at a future date, leaving the parties in fairly equal capital positions in terms of the equity in their properties. The impact of the inheritance so soon after the hearing was, as the judge observed at §18, that the husband no longer needed his interest in the former matrimonial home to discharge his indebtedness because it was either wiped out (in the case of the debt to his father) or could be discharged from the inheritance (in the case of the mortgage). To my mind, this represented a change in the basis, or fundamental assumption, upon which the consent order had been made. It was not so much that the value of the parties' assets had gone up but rather that there had been a fundamental change in the needs for which provision had to be made.

21. If any of the decided authorities assist in determining this case, I think it is therefore cases like Barder itself. Lord Brandon there (see page 492) identified the fundamental assumption made at the time of the consent order as being "that for an indefinite period, to be measured in years rather than months or weeks, the wife and the two children of the family would require a suitable home in which to reside". That assumption was "totally invalidated by the deaths of the children and the wife within 5 weeks of the order being made". In the instant case, the fundamental assumption at the time of the consent order was that the husband needed his capital from the former matrimonial home at a future date to discharge his debts in relation to his home. His inheritance meant that that was no longer so.

22. In my view, the judge was therefore entitled to substitute her own order for the consent order and the order she devised was wholly unexceptionable. I would therefore dismiss the appeal. In so doing, I would emphasise again that it is rare for a case to come within the Barder principles. It is well to remember what Lord Brandon said at page 493 of Barder when he explained that the question before the court was a difficult one because it involved a conflict between two important legal principles and a decision as to which should prevail. One principle was that cases should be decided, so far as practicable, on the true facts and the other was that it was in the public interest that there should be finality in litigation. The strength of this latter principle is to be seen in the restrictive application by the courts, over the years since Barder, of the conditions laid down in that case. The present judgment is not intended to change the jurisprudence on the subject and is no more than an application of the principles to the particular stark facts of this case.Richards LJ:23. I agree.